Chapman Freeborn blog

Global oil prices and the consumer

As many will have noted, or indeed witnessed, a large percentage of petrol stations across the UK are now extending this reduction in oil price to the consumer. This is a far cry from when the only movement the consumer saw was an upward rise or a steady levelling at best.

Many consumers have rightfully asked if the price of market rate oil has reduced by 45% then why isn’t that reflected in the airfares that all pay? Since this is the biggest cost faced by an airline then surely we as a consumer should benefit from this? It would appear that on the surface of things the carrier would disagree citing that any fuel they are using now would have been hedged in advance meaning that whatever is happening in the market now will take its time to be reflected in the price we pay. Only time will tell if they remain true to their word. I for one hope that in a tough market they open the door for cheaper fares to encourage growth in the sector for all involved.

Noting the points made by the scheduled carriers regarding the hedging of fuel I asked myself how this would work with the ad-hoc carriers who uplift on a case by case basis based on the very nature of their work? They’re not excluded from the old ‘fuel surcharge’ chestnut but we can certainly see that the direct operating costs for the carriers are reducing and we are seeing a slight reduction on a like for like charter over the years gone by. The consumer, rightfully so, appears to have a greater say now and will, without hesitation, shop with their feet for the best deal. With this in mind I actively encourage a few brave airlines to take the leap and offer the savings back to us, the consumer and the buyer to start a trend within the market.

Is anybody seeing the benefits now? Many would immediately shout no. It should be worth noting though that the vast sums required to purchase fuel saving composite wide-bodied aircraft, and of course the long lead in time for delivery has pushed some to take advantage of the situation by digging out the older wide bodies mothballed in the desert and placing back into the current aviation market, often extending their anticipated life by 4-8 years. The orders will remain in place but with delivery delays and the requirements for an immediate solution resurrecting the classics from the desert is proving to be a good move for all. Shoots of recovery after what’s been a tough time, let’s hope so.

Simon Cooper is Senior Broker  for commercial aircraft at Chapman Freeborn. For any queries relating to commercial aircraft please give Simon and his team a call on +44 (0) 1293 572 872 or on charter@chapman-freeborn.com

Image credit: Rerun van Pelt